Income volatility is increasing among working households, creating more problems with the affordability of health care
Middle- and low-income households in the United States experience income volatility, which affects their ability to pay for health care, according to a new study. The Brookings Economic Studies report found that those participating in the study, working-age adults with a median income of $ 60,000, showed signs of economic insecurity. The study found that more than half of the study participants relied on secondary sources of income such as part-time jobs to pay the bills.
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“The erosion of workers’ economic security over the past four decades has been well documented,” the study says. “The three main indicators of this trend are falling wages, eroding benefits from private sector jobs and increasing income volatility.” As secondary sources of income are sometimes unreliable, these working-class families see fluctuations in their income which have an effect on their monthly finances. Workers who don’t know what their income will be can’t budget adequately for the future, the Brookings researchers noted.
The study also highlights accessibility issues with the current U.S. healthcare system, at a time when 40% of insured adults say they have difficulty paying for medical care. The majority of study participants had health insurance, with three-quarters benefiting from employer-sponsored plans. “But health insurance was not enough to make health care affordable, beyond primary care or preventive services,” the report said. Due to cost concerns, some study participants chose to skip or delay healthcare.
Growing financial insecurity for the middle class
In a Brookings podcast, Aaron Cline, a senior fellow at Brookings, noted that with the pandemic, economic insecurity has increased in the United States. “Income volatility is increasing… middle class people live paycheck to paycheck; it is not a phenomenon for low income people. “
The researchers said they discovered a complex relationship between income volatility and the ability to pay for things like health services or prescription drugs. For some, their normal monthly income could cover expenses like premiums, but an unforeseen medical bill could be difficult to pay. For others, their main source of income alone was not enough to pay the monthly bills, so they relied on secondary sources of income. And independent contractors saw varying incomes depending on when they contracted work. The 2020 pandemic made matters worse, as the jobs or hours that workers once depended on have either been cut back or disappeared altogether.
Implications for health care
The study found that nearly 90% of participants had health insurance coverage. For the most part, routine primary and preventive care was affordable. The researchers noted that there is usually little or no charge for such visits.
Other types of care could be more problematic; consumers with high-deductible plans had varying degrees of out-of-pocket expenses, with some less generous plans leaving individuals responsible for a substantial share of health care costs.
Participants described different experiences with health savings accounts (HSAs), some being more comfortable with them than others. “HSAs were most effective for people who were more financially stable and who earned enough to save money each month,” the study said. “Of the participants who discussed HSAs, five were below the median age of the sample (four were in their 20s and one in their 40s), suggesting that these plans were attractive to young workers.”
Accessibility issues affected many participants, with more than half saying they found themselves in a situation where they needed to delay or skip medical care. It is therefore not surprising that people without insurance reported delaying or skipping care, but even those with insurance missed or delayed care that was not covered by their plan, or treatments that were not covered by their plan. the quota was high. Confusion over what was covered and lack of transparency in the healthcare system also contributed to decisions about treatment.
Financial technology and applications: limited impact on healthcare costs
The study also looked at how working-class Americans used financial technology such as budgeting apps. These Fintech solutions provide consumers with apps like Earnin, which offers several products, including a medical expense planning tool called HealthAid, and its Remedy app, which helps consumers spot medical billing errors. Another option was Even, an app that includes an HSA-like tool, where workers can plan their future healthcare expenses.
However, these types of apps seemed limited in helping consumers. “While the apps can be useful with income smoothing (Even) and more frequent payments for hours worked (Earnin), they cannot fully offset the decline in the value of wages and an overall reduction in financial stability. “, Says the study.
“Technology can alleviate the challenges associated with income volatility; it does not address the fundamental problem of inadequate wages and insufficient coverage of health plans, ”the report said. “Both of these issues must be addressed in order to ensure that all Americans have access to affordable, quality health care.”